<Page>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
<Table>
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED
BY RULE 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-12
CP&L CO.
-----------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
-----------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
</Table>
Payment of Filing Fee (Check the appropriate box):
<Table>
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
----------------------------------------------------------
(2) Aggregate number of securities to which transaction
applies:
----------------------------------------------------------
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how
it was determined):
----------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------
(5) Total fee paid:
----------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
(1) Amount Previously Paid:
----------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
----------------------------------------------------------
(3) Filing Party:
----------------------------------------------------------
(4) Date Filed:
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</Table>
<Page>
CP&L LOGO
Carolina Power & Light Company
PO Box 1551
Raleigh, NC 27602
April 1, 2002
Dear Shareholder:
I am pleased to invite you to attend the 2002 Annual Meeting of the
Shareholders of Carolina Power & Light Company. The meeting will be held at
10:00 o'clock a.m. on May 8, 2002, at the Mahaffey Theater at the Bayfront
Center, 400 First Street South, St. Petersburg, Florida.
As described in the accompanying Notice of Annual Meeting of Shareholders
and Proxy Statement, the only matter scheduled to be acted upon at the meeting
is the election of directors.
Regardless of the size of your holdings, it is important that your shares be
represented at the meeting. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING,
PLEASE COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE ACCOMPANYING
ENVELOPE OR VOTE BY TELEPHONE IN ACCORDANCE WITH THE INSTRUCTIONS ON THE
ENCLOSED PROXY CARD AS SOON AS POSSIBLE. Voting by either of these methods will
ensure that your vote is counted at the Annual Meeting if you do not attend in
person.
I am delighted that you have chosen to invest in Carolina Power & Light
Company, and look forward to seeing you at the meeting. On behalf of the
management and directors of Carolina Power & Light Company, thank you for your
continued support and confidence in 2002.
Sincerely,
/s/ William Cavanaugh III
William Cavanaugh III
Chairman of the Board, President and Chief Executive Officer
<Page>
VOTING YOUR PROXY IS IMPORTANT
Your vote is important. Please promptly SIGN, DATE and RETURN the enclosed
proxy card or VOTE BY TELEPHONE in accordance with the instructions on the
enclosed proxy card so that as many shares as possible will be represented at
the Annual Meeting.
A self-addressed envelope, which requires no postage if mailed in the United
States, is enclosed for your convenience.
<Page>
CAROLINA POWER & LIGHT COMPANY
410 S. WILMINGTON STREET
RALEIGH, NORTH CAROLINA 27601-1849
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 8, 2002
The Annual Meeting of the Shareholders of Carolina Power & Light Company
will be held at 10:00 o'clock a.m. on May 8, 2002, at the Mahaffey Theater at
the Bayfront Center, 400 First Street South, St. Petersburg, Florida. The
meeting will be held in order to:
(1) Elect five (5) Class I directors of the Company to serve three-year
terms.
(2) Transact any other business as may properly be brought before the
meeting.
All shareholders of $5 Preferred Stock, Serial Preferred Stock and Common
Stock of record at the close of business on March 1, 2002, will be entitled to
vote. The stock transfer books will remain open.
By order of the Board of Directors.
WILLIAM D. JOHNSON
Executive Vice President,
General Counsel and Secretary
Raleigh, North Carolina
April 1, 2002
<Page>
CAROLINA POWER & LIGHT COMPANY
410 S. WILMINGTON STREET
RALEIGH, NORTH CAROLINA 27601-1849
---------------------
PROXY STATEMENT
GENERAL
This Proxy Statement is furnished in connection with the Board of Directors'
of Carolina Power & Light Company (Company) solicitation of proxies to be used
at the Annual Meeting of Shareholders. That meeting will be held at 10:00
o'clock a.m. on May 8, 2002, at the Mahaffey Theater at the Bayfront Center, 400
First Street South, St. Petersburg, Florida. (For directions to the meeting
location, please see map included at the end of the Proxy Statement.) The Proxy
Statement and form of proxy were first sent to shareholders on or about
April 1, 2002.
COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR 2001,
INCLUDING FINANCIAL STATEMENTS AND SCHEDULES, ARE AVAILABLE UPON WRITTEN
REQUEST, WITHOUT CHARGE, TO THE PERSONS WHOSE PROXIES ARE SOLICITED. ANY EXHIBIT
TO FORM 10-K IS ALSO AVAILABLE UPON WRITTEN REQUEST AT A REASONABLE CHARGE FOR
COPYING AND MAILING. WRITTEN REQUESTS SHOULD BE MADE TO MR. THOMAS R. SULLIVAN,
TREASURER, P. O. BOX 1551, RALEIGH, NORTH CAROLINA 27602.
THE SECURITIES AND EXCHANGE COMMISSION DELIVERY RULES CAN BE SATISFIED BY
DELIVERING A SINGLE PROXY STATEMENT AND ANNUAL REPORT TO SHAREHOLDERS TO AN
ADDRESS SHARED BY TWO OR MORE OF OUR SHAREHOLDERS. THIS DELIVERY METHOD IS
REFERRED TO AS HOUSEHOLDING. FOR SHAREHOLDERS WHOSE SHARES OF CAROLINA POWER &
LIGHT COMPANY PREFERRED STOCK ARE HELD IN BROKERAGE ACCOUNTS, A SINGLE COPY OF
THE ANNUAL REPORT AND OF THE PROXY STATEMENT WILL BE SENT TO MULTIPLE
SHAREHOLDERS WHO SHARE THE SAME ADDRESS IF THEY HAVE PROVIDED THEIR WRITTEN OR
IMPLIED CONSENT TO SUCH DELIVERY.
IF YOU PREFER TO RECEIVE A SEPARATE COPY OF THE PROXY STATEMENT OR THE
ANNUAL REPORT, PLEASE WRITE TO SHAREHOLDER RELATIONS, P. O. BOX 1551, RALEIGH,
NORTH CAROLINA 27602 OR TELEPHONE US AT 800-662-7232, AND WE WILL PROMPTLY SEND
YOU SEPARATE COPIES.
<Page>
PROXIES
The accompanying proxy is solicited by the Board of Directors of the Company
and the entire cost of solicitation will be borne by the Company. The Company
expects to solicit proxies primarily by mail. Proxies may also be solicited by
telephone, telegraph or personally by officers and employees of the Company, who
will not be specially compensated for such services.
You may vote shares either in person or by duly authorized proxy. In
addition, you may vote your shares by telephone by following the instructions
provided in the enclosed proxy form. The telephone voting facilities for
shareholders of record will close at 12:01 a.m. E.D.T. on the morning of the
meeting. Any shareholder who has executed a proxy and attends the meeting may
elect to vote in person rather than by proxy. You may revoke any proxy given by
you in response to this solicitation at any time before the proxy is exercised
by delivering a written notice of revocation, by filing with the Secretary of
the Company a subsequently dated, properly executed proxy or by attending the
Annual Meeting and electing to vote in person. Your attendance at the Annual
Meeting, by itself, will not constitute a revocation of a proxy. If you voted by
telephone, you may also revoke your vote by any of the three methods noted
above, or you may change your vote by voting again by telephone. If you decide
to vote by completing and mailing the enclosed proxy card, you should retain a
copy of the voter control number found on the proxy card in the event that you
decide later to change or revoke your proxy. You should address any written
notices of proxy revocation to: Carolina Power & Light Company, P.O. Box 1551,
Raleigh, North Carolina 27602, Attention: Secretary.
All shares represented by effective proxies received by the Company at or
before the Annual Meeting, and not revoked before they are exercised, will be
voted in the manner specified therein. Proxies that do not contain
specifications will be voted "FOR" the election of Directors as set forth in
this Proxy Statement, and, in the discretion of the named proxies, upon any
other business properly brought before the meeting.
VOTING SECURITIES
The Directors of the Company have fixed March 1, 2002, as the record date
for shareholders entitled to vote at the Annual Meeting. Only holders of the
Company's $5 Preferred Stock, Serial Preferred Stock and Common Stock of record
at the close of business on that date will be entitled to notice of and to vote
at the Annual Meeting. Each share is entitled to one vote. As of March 1, 2002,
there were outstanding 236,997 shares of $5 Preferred Stock, 349,850 shares of
Serial Preferred Stock, and 159,608,055 shares of Common Stock. Progress
Energy Inc. (Progress Energy) owns all outstanding shares of the Company's
Common Stock.
Pursuant to the provisions of the North Carolina Business Corporation Act,
Directors will be elected by a plurality of the votes cast by the shares
entitled to vote. Withheld votes or shares held in street name that are not
voted in the election of Directors will not be included in determining the
number of votes cast. Approval of other matters to be presented at the Annual
Meeting, if any, generally will require the affirmative vote of a majority of
the shares voted on such matters. Abstentions from voting and broker non-votes
will not have the effect of a "negative" vote with respect to any such matters.
2
<Page>
ELECTION OF DIRECTORS
Based on the report of the Corporate Governance Committee (see page 9), the
Board of Directors nominates the five nominees listed below. The nominees to
serve as Directors in Class I for terms expiring in 2005 and until their
respective successors are elected and qualified are; W. D. Frederick, Jr.,
William O. McCoy, John H. Mullin, III, Carlos A. Saladrigas and J. Tylee Wilson.
There are no family relationships among any of the nominees for Director or
among any nominee and any Director or officer of the Company or its
subsidiaries, and except as described above, there is no arrangement or
understanding between any nominee and any other person pursuant to which the
nominee was selected.
Valid proxies received pursuant to this solicitation will be voted in the
manner specified. Where specifications are not made, the shares represented by
the accompanying proxy will be voted for the election of the five nominees.
Votes (other than votes withheld) will be cast pursuant to the accompanying
proxy for the election of the nominees listed above unless, by reason of death
or other unexpected occurrence, one or more of such nominees shall not be
available for election, in which event it is intended that such votes will be
cast for such substitute nominee or nominees as may be determined by the persons
named in such proxy. The Board of Directors has no reason to believe that any of
the nominees listed above will not be available for election as a Director.
The names of the five nominees for election to the Board of Directors and of
the other Directors, along with their ages, principal occupations or employment
for the past five years, and current directorships are set forth below.
Information concerning the number of shares of Progress Energy's Common Stock
beneficially owned, directly or indirectly, by all current Directors appears on
pages 6 and 7 of this Proxy Statement.
NOMINEES FOR ELECTION--CLASS I
(Terms Expiring in 2005)
W. D. FREDERICK, JR., age 67, is a citrus grower and rancher. He is a
retired partner in the law firm of Holland & Knight. He has served as a Director
of the Company since November 30, 2000 and also serves as a director of Progress
Energy, Florida Progress Corporation, Blue Cross/Blue Shield of Florida and
United Heritage Bank.
WILLIAM O. MCCOY, age 68, is a partner in Franklin Street Partners, an
investment management firm (since 1998). He previously served as Interim
Chancellor of the University of North Carolina at Chapel Hill from April 1999 to
August 2000 and as Vice President-Finance of the University of North Carolina at
Chapel Hill from 1995 to 1998. He has served as a Director of the Company since
1996 and also serves as a director of Progress Energy, Florida Progress
Corporation, Duke Realty Corporation, Acterna Corp., The Liberty Corporation and
North Carolina Capital Management Trust, and as a Trustee of Fidelity
Investments.
JOHN H. MULLIN, III, age 60, is Chairman of Ridgeway Farm, LLC, a limited
liability Company engaged in timber and agricultural activities. He has served
as a Director of the Company since 1999 and also serves as a director of
Progress Energy, Florida Progress Corporation, The Liberty Corporation and Alex
Brown Realty, Inc., and as a Trustee of The Putnam Funds.
3
<Page>
CARLOS A. SALADRIGAS, age 53, is Chief Executive Officer of ADP TotalSource
(previously The Vincam Group, Inc.), a Miami-based human resources outsourcing
company that provides human resource functions to small and mid-sized
businesses. He is also Chairman of Premier American Bank in Miami, Florida. He
has served as a Director of the Company since September 1, 2001 and also serves
as a director of Progress Energy and Florida Progress Corporation.
J. TYLEE WILSON, age 70, is retired Chairman and Chief Executive Officer of
RJR Nabisco, Inc. He has served as a Director of the Company since 1987 and also
serves as a director of Progress Energy and Florida Progress Corporation.
DIRECTORS CONTINUING IN OFFICE--CLASS II
(Terms Expiring in 2003)
EDWIN B. BORDEN, age 68, is President of The Borden Manufacturing Company, a
textile management services company. He has served as a Director of the Company
since 1985 and also serves as a director of Progress Energy, Florida Progress
Corporation, Jefferson-Pilot Corporation, Ruddick Corporation and Winston
Hotels, Inc.
DAVID L. BURNER, age 62, is Chairman and Chief Executive Officer of the
Goodrich Corporation, a provider of aerospace components, systems and services
(since July 1997). He previously served as President and Chief Executive Officer
(from December 1996 to July 1997) and President (from December 1995 to
December 1996) of the Goodrich Corporation and as President, Goodrich Aerospace
and Executive Vice President of the Goodrich Corporation (from January 1995 to
December 1995). He has served as a Director of the Company since 1999 and also
serves as a director of Progress Energy, Florida Progress Corporation,
Milacron, Inc., Lance, Inc. and Briggs & Stratton Corporation.
RICHARD L. DAUGHERTY, age 66, is retired Executive Director of NCSU Research
Corporation, a development corporation of the Centennial Campus of North
Carolina State University. He has served as a Director of the Company since 1992
and also serves as a director of Progress Energy and Florida Progress
Corporation.
RICHARD A. NUNIS, age 69, is President of New Business Solutions, Inc. He
previously served as Chairman, Walt Disney Parks & Resorts. He has served as a
Director of the Company since November 30, 2000 and also serves as a director of
Progress Energy and Florida Progress Corporation.
DIRECTORS CONTINUING IN OFFICE--CLASS III
(Terms Expiring in 2004)
WILLIAM CAVANAUGH III, age 63, is Chairman, President and Chief Executive
Officer of the Company (since May 1999). He also serves as Chairman, Progress
Energy Service Company, LLC (July 2000 to present), Chairman, Florida Power
Corporation (November 30, 2000 to present), Chairman, Progress Ventures, Inc.
(March 2000 to present), and Chairman, President and Chief Executive Officer,
Progress Energy (August 1999 to present). He previously served in various
executive positions at Carolina Power & Light Company. He has served as a
Director of the Company since 1993 and also serves as a director of Florida
Progress Corporation and Duke Realty Corporation.
CHARLES W. COKER, age 68, is Chairman of Sonoco Products Company, a
manufacturer of paperboard and paper and plastics packaging products (since
April 1998). He previously served as
4
<Page>
Chairman and Chief Executive Officer of Sonoco Products Company (from 1976 to
April 1998). He has served as a Director of the Company since 1975 and also
serves as a director of Progress Energy, Florida Progress Corporation,
BankAmerica Corporation, Sara Lee Corporation and Springs Industries, Inc.
E. MARIE MCKEE, age 51, is Senior Vice President of Corning Incorporated, a
developer of technologies for glass, ceramics, fiber optics and photonics. She
has served as a Director of the Company since 1999 and also serves as a director
of Progress Energy and Florida Progress Corporation.
JEAN GILES WITTNER, age 67, is President and Secretary of Wittner &
Co., Inc., a Florida holding company for companies that provide life insurance
products, employee benefit insurance programs, and commercial office leasing and
property management services. She has served as a Director of the Company since
November 30, 2000 and also serves as a director of Progress Energy, Florida
Progress Corporation and Raymond James Bank, FSB.
PRINCIPAL SHAREHOLDERS
The following table sets forth the only shareholder known to the Company to
beneficially own more than 5% of the outstanding shares of the Common Stock of
the Company as of December 31, 2001. The Company does not know of any
shareholder that owned more than 5% of any class of its other voting securities
as of December 31, 2001.
<Table>
<Caption>
NAME AND ADDRESS OF NUMBER OF SHARES
TITLE OF CLASS BENEFICIAL OWNER BENEFICIALLY OWNED PERCENTAGE OF CLASS
- -------------- ------------------------ ------------------ -------------------
Common Stock Progress Energy, Inc. 159,608,055 100%
410 S. Wilmington Street
Raleigh, NC 27601-1849
</Table>
5
<Page>
MANAGEMENT OWNERSHIP OF COMMON STOCK
None of the Company's directors or executive officers owns any shares of the
Company's Common or Preferred Stock.
The following table describes the beneficial ownership of the Common Stock
of Progress Energy and ownership of Progress Energy Common Stock units as of
December 31, 2001, of (i) all current Directors and nominees for Director,
(ii) each executive officer of the Company named in the Summary Compensation
Table presented later in this document and (iii) all Directors and executive
officers as a group. A unit of Common Stock does not represent an equity
interest in Progress Energy and possesses no voting rights, but is equal in
value at all times to a share of Progress Energy Common Stock. As of
December 31, 2001, none of the individuals or group in the above categories
owned one percent (1%) or more of the Progress Energy's voting securities.
<Table>
<Caption>
- -----------------------------------------------------------------------------
NUMBER OF SHARES OF COMMON STOCK
BENEFICIALLY OWNED(1) AND UNITS
REPRESENTING
NAME SHARES OF COMMON STOCK(2,3,4,5,6,7)
- -----------------------------------------------------------------------------
Edwin B. Borden 5,297 Common Stock
25,837(2) Units
David L. Burner 0 Common Stock
4,801(2) Units
William Cavanaugh III 212,190(8) Common Stock
185,500(4,5,6,7) Units
Charles W. Coker 7,498(9) Common Stock
30,565(2) Units
Richard L. Daugherty 995 Common Stock
17,987(2) Units
W. D. Frederick, Jr. 1,000 Common Stock
1,720(2) Units
William D. Johnson 36,550(11) Common Stock
19,473(5,6,7) Units
William O. McCoy 1,000 Common Stock
10,194(2) Units
Robert B. McGehee 45,083(12) Common Stock
26,032(5,6,7) Units
E. Marie McKee 600 Common Stock
4,994(2) Units
John H. Mullin, III 1,500(10) Common Stock
6,037(2) Units
Richard A. Nunis 5,000 Common Stock
731(2) Units
William S. Orser 62,364(13) Common Stock
43,644(4,5,6) Units
</Table>
6
<Page>
<Table>
<Caption>
- -----------------------------------------------------------------------------
NUMBER OF SHARES OF COMMON STOCK
BENEFICIALLY OWNED(1) AND UNITS
REPRESENTING
NAME SHARES OF COMMON STOCK(2,3,4,5,6,7)
- -----------------------------------------------------------------------------
Carlos A. Saladrigas 0 Common Stock
118(3) Units
Peter M. Scott III 36,291(14) Common Stock
16,442(5,6) Units
J. Tylee Wilson 5,000 Common Stock
8,073(2) Units
Jean Giles Wittner 2,000 Common Stock
1,679(2) Units
Shares of Common Stock beneficially
owned by all directors and executive
officers of the Company as a group
(24 persons) 611,223 Common Stock
</Table>
- ------------------------
(1)Unless otherwise noted, all shares of Progress Energy Common Stock set
forth in the table are beneficially owned, directly or indirectly, with sole
voting and investment power, by such shareholder.
(2)Consists of units representing Common Stock of Progress Energy under the
Directors' Deferred Compensation Plan and the Progress Energy Non-Employee
Director Stock Unit Plan (see "Directors' Compensation" on page 10).
(3)Consists of units representing Common Stock of Progress Energy under the
Directors' Deferred Compensation Plan.
(4)Consists of performance units under the Long-Term Compensation Program.
(5)Consists of performance shares awarded under the Performance Share
Sub-Plan of the Progress Energy 1997 Equity Incentive Plan (see "Long-Term
Incentive Plan Awards Table" on page 16 and footnote 1 thereunder for
performance shares awarded in 2001).
(6)Consists of replacement units to replace the value of Company
contributions to the Progress Energy 401(k) Savings & Stock Ownership Plan that
would have been made but for the deferral of salary under the Progress Energy
Management Deferred Compensation Plan and contribution limitations under
Section 415 of the Internal Revenue Code of 1986, as amended (see "Summary
Compensation Table" on page 13 and footnote 5 thereunder).
(7)Consists of performance units recorded to reflect awards deferred under
the Progress Energy Management Incentive Compensation Plan.
(8)Includes 175,000 shares of Progress Energy Restricted Stock and 7,764
shares of Progress Energy Common Stock with shared voting and investment power
owned by members of immediate family to which beneficial ownership has not been
disclaimed.
(9)Includes 7,298 shares of Progress Energy Common Stock with shared voting
and investment power owned by members of immediate family to which beneficial
ownership has not been disclaimed.
(10)Includes 500 shares of Progress Energy Common Stock with shared voting
and investment power owned by members of immediate family to which beneficial
ownership has not been disclaimed.
(11)Includes 32,500 shares of Progress Energy Restricted Stock.
(12)Includes 41,500 shares of Progress Energy Restricted Stock.
(13)Includes 46,667 shares of Progress Energy Restricted Stock.
(14)Includes 35,900 shares of Progress Energy Restricted Stock.
7
<Page>
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
On September 27, 1999, Florida Progress Corporation and the nine individuals
who were its directors were served with a purported class action complaint, Case
No. 99-6167CI-20, styled Lisa Fruchter, on behalf of herself and all others
similarly situated, v. Florida Progress Corporation, Richard Korpan, Clarence V.
McKee, Richard A. Nunis, Jean Giles Wittner, Michael P. Graney, Joan D. Ruffier,
Robert T. Stuart, Jr., W. D. Frederick, and Vincent J. Naimoli. The complaint
was filed in the Circuit Court of the 6th Judicial Circuit in and for Pinellas
County, Florida on September 14, 1999. The complaint seeks class action status
and injunctive relief: (1) declaring that the agreement and plan of exchange was
entered into in breach of the fiduciary duties of the Florida Progress
Corporation board of directors; (2) enjoining Florida Progress Corporation from
proceeding with the share exchange; (3) rescinding the agreement and plan of
exchange; (4) enjoining any other business combination until an auction is
conducted to obtain the highest price possible for Florida Progress Corporation;
(5) directing the Florida Progress Corporation board of directors to commence
such an auction; and (6) awarding the class an unspecified amount of damages.
The complaint also seeks an award of costs and attorneys' fees. The parties have
reached agreement on terms of settlement, which are subject to court approval.
If the settlement is not approved, Florida Progress Corporation and the nine
individual defendants intend to vigorously defend against this action. The share
exchange was consummated on November 30, 2000.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
Directors and executive officers to file reports of their holdings and
transactions in the Company's securities with the Securities and Exchange
Commission and the New York Stock Exchange. Based on Company records and other
information, the Company believes that all Section 16(a) filing requirements
applicable to its Directors and executive officers with respect to the Company's
2001 fiscal year were met.
8
<Page>
BOARD OF DIRECTORS
The Board of Directors is currently comprised of thirteen (13) members. The
Board of Directors met seven times in 2001. Average attendance of the Directors
at the meetings of the Board and its Committees held during 2001 was 98%.
The Board of Directors appoints from its members an Executive Committee, a
Committee on Audit and Corporate Performance, a Committee on Finance, a
Committee on Operations, Environmental, Health and Safety Issues, a Committee on
Organization and Compensation, and a Corporate Governance Committee. The
membership and functions of the standing Board Committees, as of December 31,
2001, are discussed below.
EXECUTIVE COMMITTEE
The Executive Committee is presently composed of one Officer/Director and
five Directors--Messrs. William Cavanaugh III, Chairman, Edwin B. Borden,
Charles W. Coker, Richard L. Daugherty, William O. McCoy and J. Tylee Wilson.
The authority and responsibility of the Executive Committee are provided in the
Company's Charter and By-Laws. The Committee held no meetings in 2001.
AUDIT AND CORPORATE
PERFORMANCE COMMITTEE
The Audit and Corporate Performance Committee is presently composed of six
non-employee Directors--Messrs. Richard L. Daugherty, Chairman, David L. Burner,
W. D. Frederick, Jr., John H. Mullin, III and Carlos A. Saladrigas, and
Ms. Jean Giles Wittner. The work of this Committee includes reviewing the annual
financial results of the Company and monitoring the activities of the
independent auditors and the internal audit department. The Committee also
reviews corporate goals established by the Company and the Company's progress in
achieving these goals. The Committee held three meetings in 2001.
CORPORATE GOVERNANCE COMMITTEE
The Corporate Governance Committee is presently composed of four
non-employee Directors--Messrs. J. Tylee Wilson, Chairman, Edwin B. Borden,
Charles W. Coker and John H. Mullin, III. This Committee is responsible for
making recommendations to the Board with respect to the governance of the
Company and the Board. Its responsibilities include recommending amendments to
the Company's Charter and By-Laws, making recommendations regarding the
structure, charter, practices and policies of the Board, ensuring that processes
are in place for annual CEO performance appraisal and review of succession
planning and management development, recommending a process for the annual
assessment of Board performance, recommending criteria for Board membership,
reviewing the qualifications of and recommending to the Board nominees for
election. The Committee will consider qualified candidates for director
nominated by shareholders at an annual meeting of shareholders; provided,
however, that written notice of any shareholder nominations must be received by
the Secretary of the Company no later than the close of business on the 60th day
prior to the first anniversary of the immediately preceding year's annual
meeting. The Committee held four meetings in 2001.
9
<Page>
FINANCE COMMITTEE
The Finance Committee is presently composed of six non-employee
Directors--Messrs. William O. McCoy, Chairman, David L. Burner, Charles W.
Coker, John H. Mullin, III, Richard A. Nunis and J. Tylee Wilson. The Committee
reviews and oversees the Company's financial policies and planning, strategic
planning and investments and pension funds. The Committee also monitors the
Company's risk management activities and reviews the Company's dividend policy
and proposed budget. The Committee held six meetings in 2001.
COMMITTEE ON OPERATIONS, ENVIRONMENTAL,
HEALTH AND SAFETY ISSUES
The Committee on Operations, Environmental, Health and Safety Issues is
presently composed of six non-employee Directors--Messrs. Edwin B. Borden,
Chairman, Richard L. Daugherty, W. D. Frederick, Jr., and Carlos A. Saladrigas,
and Ms. E. Marie McKee and Ms. Jean Giles Wittner. The Committee reviews the
Company's load forecasts and plans to carry out its development program and
reviews and assesses Company policies, procedures, and practices relative to the
protection of the environment and the safety of employees, customers,
contractors, and the public. The Committee advises the Board and makes
recommendations for the Board's consideration regarding operational,
environmental, and safety-related issues. The Committee held three meetings in
2001.
COMMITTEE ON ORGANIZATION
AND COMPENSATION
The Committee on Organization and Compensation is presently composed of six
non-employee Directors--Messrs. Charles W. Coker, Chairman, Edwin B. Borden,
William O. McCoy, Richard A. Nunis and J. Tylee Wilson, and Ms. E. Marie McKee.
The Committee ascertains that personnel policies and procedures are in keeping
with all governmental rules and regulations and are designed to attract and
retain competent, talented employees and develop the potential of these
employees. The Committee reviews all executive development plans, makes
executive compensation decisions and oversees plans for management succession.
The Committee held six meetings in 2001.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
ALL COMPENSATION PAID TO OUTSIDE DIRECTORS OF PROGRESS ENERGY IS FOR
SERVICES RENDERED ON BEHALF OF THE BOARDS OF PROGRESS ENERGY, FLORIDA PROGRESS
CORPORATION AND THE COMPANY. SPONSORSHIP OF THE VARIOUS BENEFIT PLANS DISCUSSED
IN THIS SECTION WAS TRANSFERRED FROM CAROLINA POWER & LIGHT COMPANY TO PROGRESS
ENERGY, INC., EFFECTIVE AUGUST 1, 2000. A DESCRIPTION OF THE COMPENSATION PAID
TO SAID OUTSIDE DIRECTORS FOLLOWS.
DIRECTORS' COMPENSATION
Directors who are not employees of the Company or its affiliates receive an
annual retainer of $35,000, of which $15,000 is automatically deferred under the
Progress Energy Directors' Deferred Compensation Plan (see below), and an
attendance fee of $1,500 per meeting for regularly scheduled Board meetings.
Directors who are not employees of the Company or its affiliates also receive an
attendance fee for committee meetings of $1,000. The Chairman of each Committee
receives an additional
10
<Page>
retainer of $3,000 per year. Directors who are not employees of the Company or
its affiliates receive an attendance fee of $1,000 for each day of a visit to a
plant or office of the Company or its subsidiaries, or for attendance at any
other business meeting to which the director is invited by the Company.
Directors who are officers of the Company or its affiliates do not receive an
annual retainer or attendance fees. All Directors are reimbursed for expenses
incident to their service as Directors.
In addition to the $15,000 annual retainer and any matching contributions
under the incentive compensation program that are automatically deferred,
outside Directors may elect to defer any portion of the remainder of their
annual retainer and Board attendance fees until after the termination of their
service on the Board under the Directors' Deferred Compensation Plan. Any
deferred fees are deemed to be invested in a number of Units of Common Stock of
Progress Energy, but participating Directors receive no equity interest or
voting rights in the Common Stock. The number of Units credited to the account
of a participating Director is equal to the dollar amount of the deferred fees
divided by the average of the high and low selling prices (i.e., market value)
of Progress Energy's Common Stock on the day the deferred fees would otherwise
be payable to the participating Director. The number of Units in each account is
adjusted from time to time to reflect the payment of dividends on the number of
shares of Progress Energy Common Stock represented by the Units. Unless
otherwise agreed to by the participant and the Board, when the participant
ceases to be a member of the Board of Directors, he or she will receive cash
equal to the market value of a share of Progress Energy's Common Stock on the
date of payment multiplied by the number of Units credited to the participant's
account.
Directors are also eligible for matching contributions of up to $15,000
under an incentive compensation program. Awards under this program are based
upon the achievement of the corporate incentive goals established each year by
the Board of Progress Energy, Inc. and used as the basis for a matching
contribution of shares of Common Stock for participating employees in Progress
Energy's 401(k) Savings & Stock Ownership Plan. In the event that five of the
corporate incentive goals are met, the $15,000 portion of the annual retainer
that is automatically deferred pursuant to the Progress Energy Directors'
Deferred Compensation Plan will be increased by 50 percent, with an additional
10 percent increase for each corporate incentive goal met in excess of five (up
to a maximum matching contribution of 100 percent). Such matching contribution
is automatically deferred until the Director's retirement.
Effective January 1, 1998, the Board of Directors Retirement Plan was
replaced by the Progress Energy Non-Employee Director Stock Unit Plan. Directors
had the option of rolling the value of their benefits under the Retirement Plan
into the Stock Unit Plan. Effective January 1, 2001, the Stock Unit Plan
provides for an annual grant of 350 "stock units" to each non-employee Director
who has served on the Board for at least one year and for matching grants of up
to 350 additional units to be awarded to those Directors for each year in which
certain incentive goals established by the Board are met. Each unit is equal in
value to one share of Progress Energy's Common Stock. The number of Units is
adjusted from time to time to reflect the payment of dividends with respect to
the Common Stock of Progress Energy. Benefits under the Progress Energy
Non-Employee Director Stock Unit Plan vest after a participant has been a member
of the Board for five years, and are payable solely in cash.
All of the Directors who were existing Directors or retired Directors on or
prior to September 16, 1998 participate in a Directors' Educational Contribution
Plan (Educational Plan). The Educational Plan is funded by policies of
corporate-owned life insurance on the lives of pairs of Directors, with proceeds
payable to Progress Energy at the death of the second to die in each pair. All
costs of the Educational Plan are expected to be covered from the life insurance
proceeds to be received by Progress Energy. Pursuant to
11
<Page>
this Educational Plan, Progress Energy will make a contribution in the name of
each Director to an educational institution or approved educational foundation
or fund in North Carolina or South Carolina selected by the Director and
approved by the Executive Committee of the Board of Directors. The contribution
will be made at the later to occur of the retirement of the Director from the
Board of Directors or ten years from the date of adoption of the Educational
Plan. If a Director has served as a Director for at least five but less than ten
years at the time the contribution is to be made, Progress Energy will
contribute $250,000 in the name of the Director.
If the Director has served for ten or more years, the amount of the
contribution will be $500,000. The Educational Plan was discontinued
September 16, 1998 and will not be offered as a benefit for any Director who
joins the Board subsequent to that date. The Educational Plan may be terminated
at any time in the discretion of the Executive Committee without recourse or
obligation to Progress Energy.
STOCK OWNERSHIP GUIDELINES
In an effort to more closely link the interests of the Company's Directors
with those of Progress Energy's shareholders, in December 2000, Progress
Energy's Board of Directors adopted stock ownership guidelines which are
designed to ensure that outside Directors of Progress Energy and its affiliates
have a significant financial equity investment in the Company through their
investment in Progress Energy. Those guidelines require the outside Directors to
own Progress Energy Common Stock or Units whose value is equivalent to the value
of that stock with a total value equal to five times the annual retainer paid to
outside Directors. The stock and/or Units may be acquired over a five-year
period and may include Units acquired under the Progress Energy Directors'
Deferred Compensation Plan and the Progress Energy Non-Employee Director Stock
Unit Plan.
SERVICE ON BOARDS OF SUBSIDIARIES
All compensation paid to outside Directors is for services rendered on
behalf of the Company's Board of Directors and the boards of Progress Energy and
Florida Progress Corporation.
12
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SUMMARY COMPENSATION TABLE
<Table>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS PAYOUTS
--------------------------------------------------------------------------------
OTHER RESTRICTED
ANNUAL STOCK LTIP ALL OTHER
NAME AND SALARY(1) BONUS(2)($) COMPENSATION(3) AWARD(S)(4,5) PAYOUTS(6) COMPENSATION(7)
PRINCIPAL POSITION YEAR ($) ($) ($) ($) ($)
- ----------------------------------------------------------------------------------------------------------------------------
William Cavanaugh III 2001 $1,043,380 $1,300,000 $110,038(8) $ 46,824(9) $296,949(10) $329,140(11)
Chairman, President 2000 871,483 1,657,640(12) 126,616 3,871,402 N/A 258,389
and Chief Executive 1999 778,849 610,000(13) 76,991 34,046 N/A 497,305
Officer
William S. Orser 2001 $ 548,225 $ 350,000 $ 5,943 $ 624,194(14) $113,124 $128,367(15)
Group President--CP&L 2000 469,789 416,963(16) 7,144 178,624 N/A 105,758
1999 436,759 220,000 1,735 15,683 N/A 203,193
Robert B. McGehee 2001 $ 487,110 $ 328,000 $ 15,484 $ 598,246(17) $ 73,530 $ 93,785(18)
Executive Vice President 2000 337,513 444,281(19) 15,901 280,030 N/A 74,807
1999 282,056 150,000 54,734 258,518 N/A 151,357
Peter M. Scott III 2001 $ 422,283 $ 275,000 $ 7,635 $ 138,990(20) N/A $ 80,707(21)
Executive Vice President 2000 206,613 304,000 50,350 1,126,195 N/A 50,485
and Chief Financial 1999 N/A N/A N/A N/A N/A N/A
Officer
(employed as of May 8, 2000)
William D Johnson 2001 $ 378,776 $ 255,000 $ 78,698(22) $ 394,701(23) $ 21,352 $ 56,923(24)
Executive Vice President, 2000 247,009 265,803(25) 26,734 405,131 N/A 38,012
General Counsel and 1999 192,052 100,000 56 288,450 N/A 43,190(26)
Secretary
</Table>
(1)Consists of base salary prior to (i) employee contributions to the
Progress Energy 401(k) Savings & Stock Ownership Plan and (ii) voluntary
deferrals, if any, under the Progress Energy Management Deferred Compensation
Plan. See "Other Benefit Opportunities" on page 28.
(2)Except as otherwise noted, consists of amounts awarded with respect to
performance in the stated year under the Progress Energy Management Incentive
Compensation Plan. See "Other Annual Compensation Opportunities" on page 24.
(3)Consists of gross-up payments for certain federal and state income tax
obligations, and where indicated by footnote disclosure, certain perquisites.
(4)Includes the value of restricted stock awards as of the grant date
(calculated by multiplying the closing market price of Progress Energy's
unrestricted stock on the date of grant by the number of shares awarded) granted
pursuant to Progress Energy's 1997 Equity Incentive Plan. None of the restricted
stock awards will vest, in whole or in part, in under three years from the date
of grant except in the event of a change in control of Progress Energy or in the
event of the recipient's death or disability more than one year from the grant
date. During the period for which the shares are restricted, the grantee will
receive all voting rights and cash dividends associated with the restricted
stock.
(5)Includes the value of matchable deferrals credited to the account of a
participant to replace the value of Company contributions to the Progress Energy
401(k) Savings & Stock Ownership Plan that would have been made on behalf of the
participant but for the deferral of salary under the Progress Energy Management
Deferred Compensation Plan (MDCP) compensation limitations under Section 415 of
the Internal Revenue Code of 1986, as amended ("Phantom Stock Units"). Phantom
Stock Units do not represent an equity interest in Progress Energy and
13
<Page>
the crediting of such Units to a participant's account does not convey any
voting rights. However, a Phantom Stock Unit is equal in value at all times to a
share of Progress Energy's Common Stock. Additional Phantom Stock Units are
credited from time to time to reflect the payment of dividends on the underlying
Progress Energy Common Stock. For participants with less than five years of
service with Progress Energy or its affiliates, these Phantom Stock Units vest
two years from the end of the calendar year in which they are granted.
Participants with five or more years of service with Progress Energy or its
affiliates are 100% vested in all Phantom Stock Units credited to their
accounts. Phantom Stock Units are not deemed "Matured" and therefore available
for reallocation to other deemed investment funds chosen by the participant
until two years after the end of the MDCP Year for which they were allocated.
Payment of the value of the Phantom Stock Units will be made in cash and will
generally be made on one of the following dates in accordance with the
participant's deferral election: (i) the April 1 following the date that is five
or more years from the last day of the MDCP Year for which the participant's
salary deferral is made; (ii) the April 1 following the participant's
retirement; or (iii) the April 1 following the first anniversary of the
participant's retirement. The amount of the payment will equal the fair market
value of notational deemed investment funds on the valuation date multiplied by
the number of units credited to the account of the participant for each fund.
See "Other Benefit Opportunities" on page 28.
(6)Consists of the value of payouts of awards granted under the Performance
Share Sub-Plan of Progress Energy's 1997 Equity Incentive Plan.
(7)Amounts reported in this column include dividends earned in 2001 on
awards granted under Progress Energy's Long-Term Compensation Program and
dividends allocated in 2001 on awards granted under the Performance Share
Sub-Plan of Progress Energy's 1997 Equity Incentive Plan.
(8)Consists of (i) $48,114 in gross-up payments for certain federal and
state income tax obligations and (ii) certain perquisites, including airplane
expenses of $20,942 and an automobile allowance of $18,600, both of which exceed
thresholds for footnote disclosure.
(9)Consists of 1,104 Phantom Stock Units based on the market value of a
share of Progress Energy Common Stock on the date such units were credited to
the account of the participant. Mr. Cavanaugh owns a total of 175,000 shares of
Progress Energy Restricted Stock which were valued at $7,880,250 as of
December 31, 2001.
(10)Mr. Cavanaugh has elected to defer receipt of this award until after his
date of retirement.
(11)Consists of (i) $56,966, which represents dividends earned in 2001 on
performance units awarded under the Progress Energy Long-Term Compensation
Program; (ii) $166,325, which represents dividends allocated in 2001 on
performance shares awarded under the Performance Share Sub-Plan of Progress
Energy's 1997 Equity Incentive Plan; (iii) $10,200, which represents Company
contributions under the Progress Energy 401(k) Savings & Stock Ownership Plan;
and (iv) $95,649, which represents the dollar value of the premium relating to
the term portion and the present value of the premium relating to the whole life
portion of the benefit to be received pursuant to the Executive Permanent Life
Insurance Program.
(12)Adjusted to include additional bonus amount of $372,640 that was not
determinable at the time the proxy statement for the Company's 2001 Annual
Meeting of Shareholders was prepared.
(13)Mr. Cavanaugh has elected to defer receipt of this award until after his
date of retirement.
(14)Consists of (i) 15,000 shares of Progress Energy Restricted Stock valued
at $603,867 as of March 22, 2001 and (ii) 479 Phantom Stock Units based on the
market value of a share of Progress Energy Common Stock on the date such units
were credited to the account of the participant. Mr. Orser owns a total of
46,667 shares of Progress Energy Restricted Stock which were valued at
$2,101,415 as of December 31, 2001.
(15)Consists of (i) $23,146, which represents dividends earned in 2001 on
performance units awarded under the Progress Energy Long-Term Compensation
Program; (ii) $55,471, which represents dividends allocated in 2001 on
14
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performance shares awarded under the Performance Share Sub-Plan of Progress
Energy's 1997 Equity Incentive Plan; (iii) $10,200, which represents Company
contributions under the Progress Energy 401(k) Savings & Stock Ownership Plan;
and (iv) $39,550, which represents the dollar value of the premium relating to
the term portion and the present value of the premium relating to the whole life
portion of the benefit to be received pursuant to the Executive Permanent Life
Insurance Program.
(16)Adjusted to include additional bonus amount of $141,963 that was not
determinable at the time the proxy statement for the Company's 2001 Annual
Meeting of Shareholders was prepared.
(17)Consists of (i) 14,500 shares of Progress Energy Restricted Stock valued
at $583,738 as of March 22, 2001 and (ii) 342 Phantom Stock Units based on the
market value of a share of Progress Energy Common Stock on the date such units
were credited to the account of the participant. Mr. McGehee owns a total of
41,500 shares of Progress Energy Restricted Stock, which were valued at
$1,868,745 as of December 31, 2001.
(18)Consists of (i) $42,703, which represents dividends allocated in 2001 on
performance shares awarded under the Performance Share Sub-Plan of the Progress
Energy 1997 Equity Incentive Plan; (ii) $10,200, which represents Company
contributions under the Progress Energy 401(k) Savings & Stock Ownership Plan;
and (iii) $40,882, which represents the dollar value of the premium relating to
the term portion and the present value of the premium relating to the whole life
portion of the benefit to be received pursuant to the Executive Permanent Life
Insurance Program.
(19)Adjusted to include additional bonus amount of $92,281 that was not
determinable at the time the proxy statement for the Company's 2001 Annual
Meeting of Shareholders was prepared.
(20)Consists of (i) 3,200 shares of Progress Energy Restricted Stock valued
at $128,825 as of March 22, 2001 and (ii) 239 Phantom Stock Units based on the
market value of a share of Progress Energy Common Stock on the date such units
were credited to the account of the participant. Mr. Scott owns a total of
35,900 shares of Progress Energy Restricted Stock, which were valued at
$1,252,326 as of December 31, 2001.
(21)Consists of (i) $27,773, which represents dividends allocated in 2001 on
performance shares awarded under the Performance Share Sub-Plan of Progress
Energy's 1997 Equity Incentive Plan; (ii) $10,200, which represents Company
contributions under the Progress Energy 401(k) Savings & Stock Ownership Plan;
and (iii) $42,734, which represents the dollar value of the premium relating to
the term portion and the present value of the premium relating to the whole life
portion of the benefit to be received pursuant to the Executive Permanent Life
Insurance Program.
(22)Consists of (i) $24,939 in gross-up payments for certain federal and
state income tax obligations and (ii) certain perquisites, including club dues
of $33,020 and an automobile allowance of $16,200, both of which exceed
thresholds for footnote disclosure.
(23)Consists of (i) 9,600 shares of Progress Energy Restricted Stock valued
at $386,475 as of March 22, 2001 and (ii) 194 Phantom Stock Units based on the
market value of a share of Progress Energy Common Stock on the date such units
were credited to the account of the participant. Mr. Johnson owns a total of
32,500 shares of Progress Energy Restricted Stock, which were valued at
$1,463,475 as of December 31, 2001.
(24)Consists of (i) $31,244, which represents dividends allocated in 2001 on
performance shares awarded under the Performance Share Sub-Plan of the Progress
Energy 1997 Equity Incentive Plan; (ii) $10,200, which represents Company
contributions under the Progress Energy 401(k) Savings & Stock Ownership Plan;
and (iii) $15,479, which represents the dollar value of the premium relating to
the term portion and the present value of the premium relating to the whole life
portion of the benefit to be received pursuant to the Executive Permanent Life
Insurance Program.
(25)Adjusted to include additional bonus amount of $26,803 that was not
determinable at the time the proxy statement for the Company's 2001 Annual
Meeting of Shareholders was prepared.
(26)Adjusted to include one-time incentive payment of $20,984 awarded to
Mr. Johnson in 1999 that was inadvertently omitted from the proxy statement for
the Company's 2001 Annual Meeting of Shareholders.
15
<Page>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<Table>
<Caption>
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM
- -------------------------------------------------------------------------------------- ------------------------------
(A) (B) (C) (D) (E) (F) (G)
NUMBER OF
SECURITIES
UNDERLYING % OF TOTAL
OPTIONS/ OPTIONS/SARS
SARS GRANTED TO EXERCISE OR
GRANTED EMPLOYEES IN BASE PRICE EXPIRATION
NAME (#) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
- ---- ---------- ------------ ----------- ---------- ------------- --------------
William Cavanaugh III........... 202,100 8.59% $43.49 9/30/2011 $5,527,562 $14,007,927
William S. Orser................ 50,000 2.12% 43.49 9/30/2011 1,367,531 3,465,593
Robert B. McGehee............... 55,100 2.34% 43.49 9/30/2011 1,507,020 3,819,083
Peter M. Scott III.............. 42,500 1.81% 43.49 9/30/2011 1,162,402 2,945,754
William D. Johnson.............. 42,500 1.81% 43.49 9/30/2011 1,162,402 2,945,754
</Table>
LONG-TERM INCENTIVE PLAN
AWARDS IN LAST FISCAL YEAR
<Table>
<Caption>
NUMBER OF PERFORMANCE
NAME UNITS(1) PERIOD ENDS
- ---- --------- -----------
William Cavanaugh III, ..................................... 38,686 2003
Chairman, President and
Chief Executive Officer
William S. Orser, .......................................... 13,260 2003
Group President--CP&L
Robert B. McGehee, ......................................... 11,800 2003
Executive Vice President
Peter M. Scott III, ........................................ 10,219 2003
Executive Vice President and
Chief Financial Officer
William D. Johnson, ........................................ 9,246 2003
Executive Vice President,
General Counsel and Secretary
</Table>
- ------------------------
(1)Consists of the number of performance shares awarded in 2001 under the
Performance Share Sub-Plan of the Progress Energy 1997 Equity Incentive Plan,
based on the closing price of a share of Progress Energy's Common Stock on
March 20, 2001, as published in THE WALL STREET JOURNAL. Performance Share
awards may range from up to 40% to up to 150% of a participant's base salary
depending on the participant's position and job value. The number of performance
shares awarded is recorded in a separate account for each participant, and is
adjusted to reflect dividends, stock splits or other adjustments in Progress
Energy's Common Stock. The performance period for an award under the Sub-Plan is
the three-consecutive-year period beginning in the year in which the award is
granted.
16
<Page>
There are two equally weighted performance measures under the Sub-Plan. One
performance measure is Total Shareholder Return ("TSR"), which is defined in the
Sub-Plan as the appreciation or depreciation in the value of stock (which is
equal to the closing value of the stock on the last trading day of the relevant
period minus the closing value of the stock on the last trading day of the
preceding year) plus dividends declared during the relevant period divided by
the closing value of the stock on the last trading day of the preceding year.
The other performance measure is EBITDA (Earnings Before Interest, Taxes,
Depreciation and Amortization) growth. Awards under the Sub-Plan vest on
January 1 following the end of the three-year performance period, provided,
however, that to determine each award vested under the Sub-Plan, the TSR and
EBITDA growth of Progress Energy are compared to the TSR and EBITDA growth of a
Peer Group comprised of the twenty-seven electric utility companies currently
comprising the Standard & Poor's Electric Index. The differences between
Progress Energy's TSR and EBITDA growth, and the Peer Group TSR and EBITDA
growth, respectively, are used to determine the multipliers that will be used to
calculate the number of vested performance shares in each participant's account.
(Differences in TSR can range from a low of (2.0%) or less to a high of 5% or
more, and correspond to multipliers of 0% to 200%. Differences in EBITDA growth
can range from a low of less than 0% to a high of 5% or more and correspond to
multipliers of 0% to 200%.) The multiplier is applied to the number of
performance shares in the participant's performance share account to determine
the actual number of vested performance shares in that account. The aggregate
value of vested performance shares is equal to the number of vested performance
shares in the participant's account multiplied by the closing price of Progress
Energy's Common Stock, as published in THE WALL STREET JOURNAL on the last
trading day before payment of the award.
Awards are paid in cash after expiration of the performance period. Payment
can be made in either (i) lump sum on or about April 1 of the year immediately
following the performance period or (ii) in accordance with an election to defer
in 25% increments, made during the first year of the performance period. In the
event of death, disability, retirement or a change-in-control of Progress
Energy, any award granted under the Sub-Plan immediately becomes vested. The
aggregate value of the vested award is determined using multipliers that are
based on the difference between Progress Energy's TSR and EBITDA growth and the
Peer Group TSR and EBITDA growth, respectively, over the portion of the
performance period that was completed before the terminating event occurred. See
"Long-Term Compensation Opportunities" on page 25.
17
<Page>
PENSION PLAN TABLE
<Table>
- -----------------------------------------------------------------------
ESTIMATED ANNUAL PENSION AT NORMAL RETIREMENT
(YEARS OF CREDITED SERVICE)
AVERAGE COMPENSATION
- -----------------------------------------------------------------------
15 1/2 OR MORE
10 YEARS 15 YEARS YEARS
- -----------------------------------------------------------------------
$190,000 $ 76,000 $114,000 $117,800
255,000 102,000 153,000 158,100
320,000 128,000 192,000 198,400
385,000 154,000 231,000 238,700
450,000 180,000 270,000 279,000
515,000 206,000 309,000 319,300
555,000 222,000 333,000 344,100
595,000 238,000 357,000 368,900
635,000 254,000 381,000 393,700
675,000 270,000 405,000 418,500
715,000 286,000 429,000 443,300
760,000 304,000 456,000 471,200
795,000 318,000 477,000 492,900
840,000 336,000 504,000 520,800
900,000 360,000 540,000 558,000
960,000 384,000 576,000 595,200
1,020,000 408,000 612,000 632,400
1,080,000 432,000 648,000 669,600
1,140,000 456,000 684,000 706,800
1,200,000 480,000 720,000 744,000
1,260,000 504,000 756,000 781,200
- -----------------------------------------------------------------------
</Table>
The above table demonstrates senior executive pension benefits payable upon
normal retirement under the Progress Energy Pension Plan and the Progress Energy
Supplemental Senior Executive Retirement Plan at age 65 as a function of average
annual income and years of service. Covered compensation under these plans
consists only of the amounts in the Salary and Bonus columns of the Summary
Compensation Table. Pursuant to the Progress Energy Pension Plan, a defined
benefit plan, benefits are partially offset by Social Security payments and the
monthly pension benefit payable upon retirement is based on base pay earnings,
age, and years of credited service. Benefits under the Progress Energy
Supplemental Senior Executive Retirement Plan are fully offset by Social
Security benefits and by benefits paid under the Progress Energy Pension Plan.
The monthly benefit payable upon retirement under this plan is equal to 4% of
the average of a participant's highest three years of eligible earnings for each
year of credited service with Progress Energy or any of its participating
subsidiaries up to a maximum of 62%. Benefits listed in the table above do not
reflect the Social Security or other offset. For purposes of benefits under
these plans, Messrs. Cavanaugh and Johnson each have more than 15 1/2 years of
credited service as well as three or more years of service or deemed service on
the Senior Management Committee, and are thereby entitled to the maximum
percentage allowable in the benefit formula under these plans.
18
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Mr. Orser has eight years of credited service, Mr. McGehee has 14 years of
credited service, and Mr. Scott has ten years of credited service.
EMPLOYMENT AGREEMENTS
Messrs. Cavanaugh, Orser, McGehee, Scott and Johnson have entered into
employment agreements, each of which has an effective date of August 1, 2000,
with the Company or one of its subsidiaries referred to collectively in this
section as the "Company". These agreements provide for base salary, bonuses,
perquisites and participation in the various executive compensation plans
offered to senior executives of the Company. The agreements all provide that
they will remain in effect for three years from the effective date. Each
agreement also includes an "Evergrow provision" which provides that each year,
the agreement will be extended such that the prospective term will always be
three years forward on the anniversary date of the effective date. The Company
may elect not to extend an executive officer's agreement and must notify the
officer of such an election at least sixty days prior to the annual anniversary
date of his agreement's effective date. Executive benefit plan targets,
termination and other key provisions of the agreements are discussed below.
AGREEMENT WITH MR. CAVANAUGH
Mr. Cavanaugh's agreement provides that his target compensation under
Progress Energy's Management Incentive Compensation Plan (MICP) increased to 65%
of base salary earnings, effective January 1, 2001. Mr. Cavanaugh's target
compensation under the Performance Share Sub-Plan (PSSP) of Progress Energy's
1997 Equity Incentive Plan is 147% of his base salary. Mr. Cavanaugh's agreement
notes that he received a recruitment bonus under the now suspended Deferred
Compensation Plan for Key Management Employees that included a payment of
$150,000 deferred for calendar year 1992. That amount will be used to provide
retirement income to him of $121,368 per year for 15 years commencing January 1
following his attainment of age 65. The agreement with Mr. Cavanaugh also
provides that, as of September 2, 1992, Mr. Cavanaugh was granted 14 years of
deemed service for purposes of the Supplemental Senior Executive Retirement Plan
(SERP).
The agreement with Mr. Cavanaugh provides that upon termination of
employment without cause or constructive termination of employment, he will be
provided with his base salary at the current rate for the remainder of the term
of the agreement and will be eligible to retain all benefits in which he has
vested under existing benefit plans. Additionally, Progress Energy will
reimburse him for certain health benefits for up to 18 months after the
termination of his employment. The agreement provides that a constructive
termination will be deemed to occur if (i) there is a change in the form of
ownership of Progress Energy and (ii) Mr. Cavanaugh is offered a new position
with a material change in authority, duty, wages or benefits, or Mr. Cavanaugh
is asked to relocate more than 50 miles. If Mr. Cavanaugh's employment is
constructively terminated, he will be entitled to the greater of the benefits
described above or the benefits, if any, to which he is entitled under Progress
Energy's Management Change-in-Control Plan. If Progress Energy terminates
Mr. Cavanaugh's employment for cause, he will be eligible to retain all benefits
in which he has vested under existing benefit plans, but he shall not be
entitled to any form of salary continuance or any form of severance benefits. He
will also be entitled to any earned but unpaid salary. The agreement with
Mr. Cavanaugh provides that if he terminates his employment voluntarily at any
time, he shall retain all vested benefits but shall not be entitled to any form
of salary continuance or any form of severance benefit.
19
<Page>
AGREEMENT WITH MR. ORSER
Mr. Orser's agreement provides that his target compensation under Progress
Energy's MICP increased to 45% of base salary earnings, effective January 1,
2001. Mr. Orser's target compensation under the PSSP is 78% of his base salary.
Mr. Orser's agreement notes that pursuant to a 1993 employment agreement with
the Company, he received a recruitment bonus under the now suspended Deferred
Compensation Plan for Key Management Employees, and that he is credited with
nine years of service solely for purposes of determining benefits in connection
with that bonus. The agreement also notes that Mr. Orser is automatically deemed
vested for his benefits under the SERP, and will be deemed eligible for early
retirement benefits under the SERP at age 60, assuming his continued employment
at Progress Energy until age 60.
The agreement with Mr. Orser provides that upon termination of employment
without cause or constructive termination of employment, he will be provided
with his base salary at the current rate for the remainder of the term of the
agreement, and will be eligible to retain all benefits in which he has vested
under existing benefit plans. Additionally, he will be entitled to certain
health benefits. The agreement provides that a constructive termination will be
deemed to occur if (i) there is a change in the form of ownership of Progress
Energy and (ii) Mr. Orser is offered a new position with a material change in
authority, duty, wages or benefits, or is asked to relocate more than 50 miles.
If Mr. Orser's employment is constructively terminated, he will be entitled to
the greater of the benefits described above or the benefits, if any, to which he
is entitled under Progress Energy's Management Change-in-Control Plan. If
Progress Energy terminates Mr. Orser's employment for cause, he will be eligible
to retain all benefits in which he has vested under existing benefit plans, but
he shall not be entitled to any form of salary continuance or any form of
severance benefits. He will also be entitled to any earned but unpaid salary.
The agreement with Mr. Orser provides that if he terminates his employment
voluntarily at any time, he shall retain all vested benefits but shall not be
entitled to any form of salary continuance or any form of severance benefit. The
agreement also provides that if, while Mr. Orser is between the ages of 55 and
60, his employment is terminated without cause, or constructively terminated or
if he voluntarily terminates his employment, he will receive $153,912 (less
applicable taxes) a year for life, less benefits payable under the Progress
Energy Pension Plan and in lieu of any SERP benefit. Additionally, Mr. Orser
will be eligible to retain all benefits in which he has vested under existing
benefit plans.
AGREEMENT WITH MR. MCGEHEE
Mr. McGehee's agreement provides that his target compensation under Progress
Energy's MICP increased to 45% of base salary earnings, effective January 1,
2001. Mr. McGehee's target compensation under the PSSP is 78% of his base
salary. Mr. McGehee's agreement notes that he received a retention agreement
bonus under the now suspended Deferred Compensation Plan for Key Management
Employees which vests based on his continued employment beyond age 60. The
agreement also notes that upon hire, Mr. McGehee was awarded 10 years of service
toward the benefits and vesting requirements of the SERP, three years of which
were deemed to have been in service on the Senior Management Committee, solely
for purposes of the SERP.
The agreement with Mr. McGehee provides that upon termination of employment
without cause or constructive termination of employment, he will be provided
with his base salary at the current rate for the remainder of the term of the
agreement, and will be eligible to retain all benefits in which he has vested
under existing benefit programs. Additionally, Progress Energy will reimburse
him for certain health
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benefits for up to 18 months after the termination of his employment. The
agreement provides that a constructive termination will be deemed to occur if
(i) there is a change in the form of ownership of Progress Energy and
(ii) Mr. McGehee is offered a new position with a material change in authority,
duty, wages or benefits, or is asked to relocate more than 50 miles. If
Mr. McGehee's employment is constructively terminated, he will be entitled to
the greater of the benefits described above or the benefits, if any, to which he
is entitled under Progress Energy's Management Change-in-Control Plan. If
Progress Energy terminates Mr. McGehee's employment for cause, he will be
eligible to retain all benefits in which he has vested under existing benefit
plans, but he shall not be entitled to any form of salary continuance or any
form of severance benefits. He will also be entitled to any earned but unpaid
salary. The agreement with Mr. McGehee provides that if he terminates his
employment voluntarily at any time, he shall retain all vested benefits but
shall not be entitled to any form of salary continuance or any form of severance
benefit.
AGREEMENT WITH MR. SCOTT
Mr. Scott's agreement provides that his target compensation under the MICP
increased to 45% of base salary earnings, effective January 1, 2001.
Mr. Scott's target compensation under the PSSP of Progress Energy's 1997 Equity
Incentive Plan is 78% of his base salary. Pursuant to the terms of his
agreement, Mr. Scott received transition compensation of $100,000, and has been
awarded seven years of deemed service toward the benefits and vesting
requirements of the SERP.
The agreement with Mr. Scott provides that upon termination of employment
without cause or constructive termination of employment, he will be provided
with his base salary at the current rate for the remainder of the term of the
agreement and will be eligible to retain all benefits in which he has vested
under existing benefit plans. Additionally, Progress Energy will reimburse him
for certain health benefits for up to 18 months after the termination of his
employment. The agreement provides that a constructive termination will be
deemed to occur if (i) there is a change in the form of ownership of Progress
Energy and (ii) Mr. Scott is offered a new position with a material change in
authority, duty, wages or benefits, or Mr. Scott is asked to relocate more than
50 miles. If Mr. Scott's employment is constructively terminated, he will be
entitled to the greater of the benefits described above or the benefits, if any,
to which he is entitled under Progress Energy's Management Change-in-Control
Plan. If Progress Energy terminates Mr. Scott's employment for cause, he will be
eligible to retain all benefits in which he has vested under existing benefit
plans, but he shall not be entitled to any form of salary continuance or any
form of severance benefits. He will also be entitled to any earned but unpaid
salary. The agreement with Mr. Scott provides that if he terminates his
employment voluntarily at any time, he shall retain all vested benefits but
shall not be entitled to any form of salary continuance or any form of severance
benefit.
AGREEMENT WITH MR. JOHNSON
Mr. Johnson's agreement provides that his target compensation under the MICP
increased to 45% of base salary earnings, effective January 1, 2001.
Mr. Johnson's target compensation under the PSSP of Progress Energy's 1997
Equity Incentive Plan is 78% of his base salary. The agreement with Mr. Johnson
also notes that he was awarded seven years of deemed service toward the benefits
and vesting requirements of the SERP. Three of those years will also be deemed
service on the Senior Management Committee.
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The agreement with Mr. Johnson provides that upon termination of employment
without cause or constructive termination of employment, he will be provided
with his base salary at the current rate for the remainder of the term of the
agreement and will be eligible to retain all benefits in which he has vested
under existing benefit plans. Additionally, Progress Energy will reimburse him
for certain health benefits for up to 18 months after the termination of his
employment. The agreement provides that a constructive termination will be
deemed to occur if (i) there is a change in the form of ownership of Progress
Energy and (ii) Mr. Johnson is offered a new position with a material change in
authority, duty, wages or benefits, or Mr. Johnson is asked to relocate more
than 50 miles. If Mr. Johnson's employment is constructively terminated, he will
be entitled to the greater of the benefits described above or the benefits, if
any, to which he is entitled under Progress Energy's Management
Change-in-Control Plan. If Progress Energy terminates Mr. Johnson's employment
for cause, he will be eligible to retain all benefits in which he has vested
under existing benefit plans, but he shall not be entitled to any form of salary
continuance or any form of severance benefits. He will also be entitled to any
earned but unpaid salary. The agreement with Mr. Johnson provides that if he
terminates his employment voluntarily at any time, he shall retain all vested
benefits but shall not be entitled to any form of salary continuance or any form
of severance benefit.
REPORT OF BOARD COMMITTEE ON ORGANIZATION
AND COMPENSATION
The composition of the Boards of Directors of the Company, Florida Progress
and Progress Energy is identical, as is the composition of the Committees on
Organization and Compensation of those Boards (collectively, the "Committees").
The Committees are composed entirely of the same six independent outside
directors who are not eligible to participate in any compensation program in
which Progress Energy executives participate other than the Progress Energy 1997
Equity Incentive Plan. The following report is the joint report of the
Committees with respect to the compensation of the executive officers of
Progress Energy. Progress Energy's executive officers serve as officers and/or
directors of various Progress Energy subsidiaries. They have multiple
responsibilities within and provide various services to Progress Energy and its
subsidiaries. The total compensation of Progress Energy's executive officers is
designed to cover the full range of services they provide to Progress Energy and
its subsidiaries. It is not the policy of Progress Energy to allocate
compensation paid to its executive officers among the various subsidiaries to
which they provide services.
COMPENSATION PRINCIPLES
COMPARISON GROUPS
Progress Energy uses an independent executive benefits consulting firm to
assist Progress Energy in meeting its compensation objectives. Each year this
consulting firm provides the Committees with an analysis comparing overall
compensation paid to Progress Energy's executives with overall compensation paid
to executives of two comparison groups of electric utility companies. One
comparison group consists of fourteen of the electric utility companies with
fossil fuel and nuclear operations in the eastern portion of the United States.
The other comparison group consists of a broad group of electric utilities
across the United States. While these comparison groups are different from the
group of companies comprising the Standard & Poor's Electric Index, which is a
published industry index, the Committees believe these electric utility
companies are appropriate for overall compensation comparisons because they
reflect the most appropriate labor markets for Progress Energy's executives.
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Progress Energy's executive compensation program consists of four major
elements: base salary; other annual compensation opportunities; long-term
compensation opportunities; and other benefit opportunities. The Committees'
objective in administering this program is to structure, through a combination
of these elements, an overall compensation package for executives which
approximates in value the 75th percentile of overall compensation paid to
executives of the comparison group. Overall compensation paid to Progress
Energy's executives in 2001 met this objective.
STOCK OWNERSHIP GUIDELINES
In an effort to more closely link the interests of Progress Energy's
management with those of its shareholders, in 1996 the Board of Directors
adopted stock ownership guidelines which are designed to ensure that Progress
Energy's management has a significant financial equity investment in Progress
Energy. Those guidelines require Progress Energy's officers to own from 1 to 4
times their base salary in the form of Progress Energy Common Stock within five
years. (The specific multiplier applied to base salary depends upon the
individual's position.) In addition to shares owned outright, the following are
considered stock owned by executives and department heads for purposes of the
guidelines: (1) stock held in any defined benefit, defined contribution, ESOP or
other stock-based plan; (2) performance units or phantom stock ("derivative
securities") deferred under an annual incentive or deferral plan;
(3) performance units or phantom stock earned and deferred in any long-term
incentive plan account; (4) restricted stock awards; and (5) stock held in a
family trust or immediate family holdings.
SECTION 162(M)
Section 162(m) of the Internal Revenue Code of 1986, as amended (Code)
imposes a limit, with certain exceptions, on the amount a publicly held
corporation may deduct for compensation over $1 million paid or accrued with
respect to the company's Chief Executive Officer and any of the other four most
highly compensated officers. Certain performance-based compensation is, however,
specifically exempt from the deduction limit. To qualify as exempt, compensation
must be made pursuant to a plan that is (1) administered by a committee of
outside directors, (2) based on achieving objective performance goals and
(3) disclosed to and approved by the shareholders. The 2001 compensation
disclosed in Part III hereof under the heading "Executive Compensation--Florida
Progress--Compensation of Executive Officers," does not exceed the limit, except
in the cases of Messrs. Cavanaugh, and McGehee, who had non-deductible
compensation of approximately $3,211,526 and $386,770, respectively.
Mr. Cavanaugh's non-deductible compensation was attributable to restricted stock
income, miscellaneous income, non-deferred bonuses and base salary.
Mr. McGehee's non-deductible compensation was attributable to restricted stock
income, miscellaneous income and non-deferred bonuses.
The Committees believe the current design of Progress Energy's compensation
program is sound in linking pay to performance and to the interests of
shareholders, and allowing appropriate flexibility in determining amounts to be
awarded. Therefore, Progress Energy does not have a policy that requires the
Committees to qualify compensation awarded to executive officers for
deductibility under Section 162(m) of the Code. The Committees do, however,
consider the impact of Section 162(m) when determining executive compensation,
and the Progress Energy 1997 Equity Incentive Plan is intended to minimize the
effect of this provision. Although the Committees are not required to qualify
executive compensation paid to Company executives for exemption from
Section 162(m), they will continue to consider the effects of Section 162(m)
when making compensation decisions.
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ELEMENTS OF EXECUTIVE COMPENSATION PROGRAM
Set forth below is a description of the major elements of Progress Energy's
executive compensation program and their relationship to corporate performance,
as well as a summary of the actions taken by the Committees with respect to the
compensation of Progress Energy's Chief Executive Officer.
BASE SALARY
Executives within Progress Energy receive a base salary determined by the
Committees based upon the value of their position compared to competitively
established salary ranges, their individual performance and overall corporate
performance. The Committees do not utilize a specific mathematical formula in
determining base salaries. The Committees in their discretion approved the base
salaries of the Chief Executive Officer and the named executives of the Company,
as set forth in the Summary Compensation Table. These salaries were based on
each executive's level of responsibility within Progress Energy, the competitive
level of compensation for executives in the comparison group of utilities, the
achievement of corporate goals and individual merit performance as qualitatively
determined by the Committees.
OTHER ANNUAL COMPENSATION OPPORTUNITIES
MANAGEMENT INCENTIVE COMPENSATION PLAN
Progress Energy sponsors the Management Incentive Compensation Plan (MICP)
for its senior executives, department heads and selected key employees. In order
for awards to be made under the MICP, two conditions must be satisfied. First, a
contribution must be earned by one or more groups of employees under the
corporate incentive feature of Progress Energy's 401(k) Savings & Stock
Ownership Plan, a tax qualified 401(k) plan. Incentive matching contributions
are earned by participating employees if at least five out of ten annual
corporate and business unit goals are met. (See the description of Progress
Energy's 401(k) Savings & Stock Ownership Plan, under "Other Benefit
Opportunities" below.) Second, Progress Energy's return on common equity and
EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) growth
for the most recent three-year period must be above the median of those
companies in a comparison group that is comprised of the twenty-seven electric
utility companies currently comprising the Standard & Poor's Electric Index.
If participants at or above the department head level of Progress Energy are
eligible for awards, then the Committees in their discretion determine whether
awards are to be made and, if so, in what amounts. If participants below the
department head level of Progress Energy are eligible for awards, then the Chief
Executive Officer of Progress Energy has sole and complete authority to approve
such awards.
Awards consist of both a corporate component and a noncorporate component.
Award opportunities, expressed as a percentage of annual base salary earnings,
are applicable to both components of an award. The corporate component of an
award is based upon the overall performance of Progress Energy. The noncorporate
component of an award is based upon the level of attainment of business
unit/subsidiary, departmental and individual performance measures. Those
measures are evaluated in terms of three levels of performance--outstanding,
target and threshold--each of which is related to a particular payout
percentage. If earned, awards are either paid in cash in the succeeding year or
deferred to a later date, as elected by each individual participant. Deferred
awards are recorded in the form of performance units. Each performance unit is
generally equivalent to a share of Progress Energy's Common Stock.
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The threshold requirements for award eligibility, as discussed above, were
met and exceeded in 2001. At meetings of the Committees on March 20, 2002, based
on highly commendable performance, awards were made at the discretion of the
Committees to the named executives, including the Chief Executive Officer of the
Company, as set forth in the Summary Compensation Table under the Bonus column.
LONG-TERM COMPENSATION OPPORTUNITIES
1997 EQUITY INCENTIVE PLAN
The Progress Energy 1997 Equity Incentive Plan (the "Plan"), which was
approved by Progress Energy's shareholders in 1997, allows the Progress Energy
Board Committee on Organization and Compensation (the "Progress Energy
Committee") to make various types of awards to officers, other key employees,
and also Directors of Progress Energy, its affiliates and subsidiaries.
Selection of non-Director participants is within the sole discretion of the
Progress Energy Committee. Thus, the number of persons eligible to participate
in the Plan and the number of grantees may vary from year to year. The Plan was
effective as of January 1, 1997, and will expire on January 1, 2007; provided,
however, that the Plan will be frozen effective May 8, 2002 if Progress Energy's
shareholders approve the proposed 2002 Equity Incentive Plan. All Plan awards
made prior to and outstanding on that date shall remain valid in accordance with
their terms and conditions.
The Plan is a broad umbrella plan that allows Progress Energy to enter into
Award Agreements with participants and adopt various individual Sub-Plans that
will permit the grant of the following types of awards: nonqualified stock
options, incentive stock options, stock appreciation rights, restricted stock,
performance units, performance shares and other stock unit awards or stock-based
forms of awards. The Plan sets forth certain minimum requirements for each type
of award, with detailed provisions regarding awards to be set out either in
Award Agreements or in the Sub-Plans adopted under the Plan. Subject to
adjustment as provided in the Plan, the maximum aggregate number of shares that
may be issued over the years pursuant to awards made under the Plan cannot
exceed 5,000,000 shares of Progress Energy Common Stock, which may be in any
combination of options, restricted stock, or any other right or option.
Under the terms of the Plan, the Progress Energy Committee may grant awards
in a manner that qualifies them for the performance-based exception to
Section 162(m) of the Internal Revenue Code of 1986, as amended, or it may grant
awards that do not qualify for the exemption.
PERFORMANCE SHARE SUB-PLAN
Pursuant to the provisions of the Plan, the Progress Energy Committee
adopted the Performance Share Sub-Plan, which governs the issuance of
performance share awards to officers and key employees within Progress Energy,
as selected by the Progress Energy Committee in its sole discretion. A
"performance share" is a unit granted to a participant, the value of which is
equal to the value of a share of Progress Energy's Common Stock. The Progress
Energy Committee may grant performance share awards subject to a limit that
ranges from up to 40% to up to 150% of a participant's base salary, depending
upon the participant's position and job value. (For purposes of the Sub-Plan,
base salary is not reduced to reflect salary deferrals and does not include
incentive compensation.) The number of performance shares awarded are recorded
in a separate account for each participant, and are adjusted to reflect
dividends, stock splits or other adjustments in Progress Energy's Common Stock.
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The performance period for an award under the Sub-Plan is the three
consecutive year period beginning in the year in which the award is granted.
There are two equally weighted performance measures under the Sub-Plan. One
performance measure is Total Shareholder Return ("TSR"), which is defined in the
Sub-Plan as the appreciation or depreciation in the value of stock (which is
equal to the closing value of the stock on the last trading day of the relevant
period minus the closing value of the stock on the last trading day of the
preceding year) plus dividends declared during the relevant period, divided by
the closing value of the stock on the last trading day of the preceding year.
The other performance measure is EBITDA growth. Awards under the Sub-Plan vest
on January 1 following the end of a three-year performance period; provided,
however, that the following methodology is used to determine each award vested
under the Sub-Plan: 1) the TSR and EBITDA growth for Progress Energy for each
year during the performance period is determined; 2) those annual figures are
averaged to determine Progress Energy TSR and EBITDA growth, respectively;
3) the average TSR and EBITDA growth for all Peer Group utilities for each year
during the performance period is determined (the Peer Group is currently
comprised of the twenty-seven major electric utility companies within the
Standard & Poor's Electric Index); 4) those figures are averaged, respectively,
to determine the Peer Group TSR and EBITDA growth; 5) the Peer Group TSR and
EBITDA growth for the performance period is subtracted from Progress Energy TSR
and EBITDA growth, respectively, for the performance period; 6) the differences
between Progress Energy TSR and EBITDA growth and the Peer Group TSR and EBITDA
growth, respectively, are used to determine the multipliers that will be used to
calculate the number of vested performance shares in each participant's account.
(Differences in TSR can range from a low of (2.0%) or less to a high of 5% or
more, and correspond to multipliers of 0 to 200%. Differences in EBITDA growth
can range from a low of less than 0% to a high of 5% or more and correspond to
multipliers of 0 to 200%.); and 7) the multipliers are each applied
independently to one-half of the number of performance shares in the
participant's performance share account to determine the actual number of vested
performance shares in that account. The aggregate value of vested performance
shares is equal to the number of vested performance shares in the participant's
account multiplied by the closing price of Progress Energy's Common Stock, as
published in THE WALL STREET JOURNAL on the last trading day before payment of
the award.
Awards are paid in cash after expiration of the performance period. Payment
can be made in either (i) lump sum on or about April 1 of the year immediately
following the performance period or (ii) in accordance with an election to defer
in 25% increments, made during the first year of the performance period. In the
event of death, disability, retirement or a change-in-control of Progress
Energy, any award granted under the Sub-Plan immediately becomes vested. The
aggregate value of the vested award is determined using multipliers that are
based on the difference between Progress Energy TSR and EBITDA growth and the
Peer Group TSR and EBITDA growth, respectively, over the portion of the
performance period that was completed before the terminating event occurred.
RESTRICTED STOCK AWARDS
Section 9 of the Plan provides for the granting of shares of restricted
stock by the Progress Energy Committee to "key employees" within Progress Energy
in such amounts and for such duration and/or consideration as it shall
determine. The Plan defines "key employee" as an officer or other employee
within Progress Energy, who, in the opinion of the Progress Energy Committee,
can contribute significantly to the growth and profitability of, or perform
services of major importance to, Progress Energy, including its affiliates. Each
restricted stock grant must be evidenced by an agreement specifying the period
of
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restriction, the conditions that must be satisfied prior to removal of the
restriction, the number of shares granted, and such other provisions as the
Progress Energy Committee shall determine.
Restricted stock covered by each award made under the Plan will be provided
to and become freely transferable by the recipient after the last day of the
period of restriction and/or upon the satisfaction of other conditions as
determined by the Progress Energy Committee. If the grant of restricted stock is
performance based, the total period of restriction for any or all shares or
units of restricted stock granted shall be no less than one (1) year except in
the event of a change in control of Progress Energy. Any other shares of
restricted stock issued pursuant to the Plan must provide that the minimum
period of restrictions shall be three (3) years, which period of restriction may
permit the removal of restrictions on no more than one-third ( 1/3) of the
shares of restricted stock at the end of the first year following the grant
date, and the removal of the restrictions on an additional one-third ( 1/3) of
the shares at the end of each subsequent year. The Plan provides that in no
event shall any restrictions be removed from shares of restricted stock during
the first year following the grant date, except in the event of a
change-in-control.
During the period of restriction, recipients of shares of restricted stock
granted under the Plan may exercise full voting rights with respect to those
shares, and shall be entitled to receive all dividends and other distributions
paid with respect to those shares. If any such dividends or distributions are
paid in shares, those shares shall be subject to the same restrictions on
transferability as the restricted stock with respect to which they were
distributed.
STOCK OPTIONS
Pursuant to Section 7 of the Plan, the Progress Energy Committee is
authorized to grant stock options to "key employees." Grants of stock options to
directors of Progress Energy must be approved by the full Board of Progress
Energy, and must consist only of "Nonqualified Stock Options" (options that are
not intended to be "Incentive Stock Options" within the meaning of Section 422A
of the Internal Revenue Code of 1986, as amended). Subject to the terms and
provisions of the Plan, the Progress Energy Committee has sole and complete
discretion to determine the type of option granted, the option price, the
duration of the option, the number of shares to which an option pertains, any
conditions on the exercisability of the option and the conditions under which
the option may be terminated. The specific terms and conditions applicable to
each option will be detailed in an Award Agreement.
The exercise price per share of stock covered by an option will be
determined by the Progress Energy Committee at the time of grant; provided,
however, that the option price shall not be less than 100% of the fair market
value of Progress Energy's Common Stock on the grant date.
Options granted under the Plan are exercisable at such times and subject to
such restrictions and conditions as the Progress Energy Committee determines at
the time of grant; provided, however, that no option may be exercisable more
than ten years from the grant date.
Options must be exercised by the delivery of a notice from the grantee to
Progress Energy or its designee in the form prescribed by the Progress Energy
Committee. The notice must set forth the number of shares with respect to which
the option is to be exercised. The option price is payable to Progress Energy in
cash and/or by the delivery of shares of Progress Energy Common Stock valued at
fair market value at the time of exercise. In addition, at the request of the
grantee, and subject to applicable laws and regulation, Progress Energy may
cooperate in a cashless exercise of the option.
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The maximum number of shares of Progress Energy Common Stock subject to
options, stock appreciation rights and/or restricted stock granted to any
covered participant for any performance period cannot exceed 250,000 shares.
OTHER BENEFIT OPPORTUNITIES
The following additional benefit opportunities are also available to
Progress Energy's senior executives:
- Progress Energy sponsors the Management Deferred Compensation Plan (MDCP),
an unfunded, deferred compensation arrangement established for the benefit
of a select group of management and highly compensated employees of
Progress Energy and its participating subsidiaries. Under the MDCP, an
eligible employee may elect to defer a portion of his or her salary until
the April 1 following the date that is five or more years from the last
day of the MDCP Year for which the deferral is made, the April 1 following
his or her date of retirement, or the April 1 following the first
anniversary of his or her date of retirement. Deferrals will be made to
deferral accounts administered pursuant to the MDCP in the form of deemed
investments in certain deemed investment funds individually chosen by each
participating employee from a list of investment options provided pursuant
to the MDCP. Additionally, qualifying participants will receive matching
allocations from Progress Energy or one of its affiliates (generally
reflecting foregone company allocations to participants' 401(k) accounts
due to such salary deferrals, and/or foregone company allocations to the
participants' 401(k) accounts due to certain Internal Revenue Code
limits), which will be allocated to a Company account that will be deemed
initially to be invested in hypothetical shares of Progress Energy's
Common Stock. These allocations do not represent an equity interest in
Progress Energy and convey no voting rights to their owners. However,
additional allocations are credited from time to time to reflect the
payment of dividends on Progress Energy's Common Stock. When a
participant's Company account has matured, pursuant to the terms of the
MDCP, the participant may reallocate any part of such account among the
deemed investment funds chosen by the participant.
- Progress Energy sponsors an executive split dollar life insurance program
which consists of two separate plans. The first plan provides life
insurance coverage approximately equal to three times salary for senior
executives. The second plan provides additional life insurance coverage
approximately equal to three times salary for those officers of Progress
Energy who are also members of the Progress Energy Board of Directors.
- Progress Energy also sponsors broad-based employee benefit plans for
senior executives of participating subsidiaries. Under the Progress Energy
401(k) Savings & Stock Ownership Plan, a salary reduction plan under
Section 401(k) of the Code, eligible, highly compensated employees of
participating companies may invest up to 12% of earnings (up to a maximum
of $10,500 in 2001) on a before-tax basis in Progress Energy's Common
Stock and other investment options. Progress Energy makes a matching
allocation of 50% of such investment (up to 3% of eligible earnings) which
is invested in Progress Energy Common Stock. Under an incentive feature,
Progress Energy's allocation may be increased by up to an additional 50%
if certain strategic corporate and business unit financial, operating,
safety, customer satisfaction, and other performance goals are met.
Progress Energy also sponsors the Progress Energy Pension Plan, a defined
benefit plan (cash balance formula), which covers eligible employees of
participating subsidiaries who have been
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employed within Progress Energy for at least one year. The right to
receive pension benefits under this plan is vested after five years.
- Progress Energy sponsors the Restoration Retirement Plan (the "Restoration
Plan"), an unfunded retirement plan for a select group of management or
highly compensated employees of participating subsidiaries. The
Restoration Plan "restores" the full benefit that would be provided under
the Pension Plan but for certain Code limits imposed on the benefit levels
of highly compensated employees. Generally, the benefit for participants
is a monthly benefit payment equal to the difference between (i) a
participant's accrued benefit under the Pension Plan without regard to the
Internal Revenue Service compensation and benefit limits and (ii) a
participant's accrued benefit as calculated under the Pension Plan. The
Restoration Plan also applies to any employee who defers more than 10% of
his salary under the MDCP. The eligibility and vesting requirement for the
Restoration Plan are the same as those for the Pension Plan. Participants
eligible to receive benefits under the Supplemental Senior Executive
Retirement Plan forego participation in and rights under the Restoration
Plan.
- Progress Energy sponsors the Supplemental Senior Executive Retirement Plan
which provides a retirement benefit for eligible senior executives equal
to 4% of the average of their highest three years of base salary earnings
and annual bonus for each year of credited service with Progress Energy,
up to a maximum of 62%. Benefits under the Supplemental Senior Executive
Retirement Plan are fully offset by Social Security benefits and by
benefits paid under Progress Energy's Pension Plan.
- Progress Energy's senior executives also receive certain perquisites and
other personal benefits. In addition, executives received gross-up
payments in 2001 for related federal and state income tax obligations, as
disclosed in the Summary Compensation Table on page 13.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
Compensation in 2001 for the Chief Executive Officer was consistent with the
compensation principles described above and reflected performance of Progress
Energy and the individual in 2001, as well as services in 2001. The
determination of his compensation by the Committees was qualitative in nature
and based on a variety of factors, including comparison group compensation data,
attainment of various corporate goals, total shareholder return, earnings per
share and other financial and operating performance, individual performance and
other factors. Specific mathematical weights were not assigned to these factors.
Overall compensation in 2001 fell within the targeted level (75th percentile) of
overall compensation paid to chief executive officers in the comparison groups.
The Committee considered the successful completion of the acquisition of
Florida Progress, noting that the transaction represented the attainment of one
of Progress Energy's key strategic objectives--gaining the scope and scale to be
a formidable competitor among energy providers for the Southeast. The Committee
also considered the significant progress made in the process of integrating the
two companies, and specifically noted the reorganization of Progress Energy's
business along strategic lines and the formation of new business units,
including one which was created to manage and grow Progress Energy's
non-regulated generation assets and wholesale energy marketing and trading. The
Committee took into account the progress of Progress Energy's development of its
non-regulated enterprises. The Committee considered the success of Progress
Energy in obtaining all regulatory approvals required for the creation of
29
<Page>
a registered holding company and for the acquisition of Florida Progress, with
no significant conditions or restrictions. The Committee also noted Progress
Energy's success in developing and effectively communicating its position on
industry restructuring and in addressing other important regulatory issues at
the state and federal levels.
The Committee considered the fact that the leadership provided by
Mr. Cavanaugh contributed significantly to Progress Energy's success in
achieving corporate goals, implementing strategic initiatives, achieving
national leadership in the fields of nuclear power and electric utility
operations, focusing on leadership development and succession planning,
implementing programs designed to enhance the diversity of Progress Energy's
work force, improving customer and community relations and supporting the
economic growth and quality of life in Progress Energy's service area.
Committee on Organization and
Compensation:
Charles W. Coker, Chairman
Edwin B. Borden
William O. McCoy
E. Marie McKee
Richard A. Nunis
J. Tylee Wilson
30
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REPORT OF THE AUDIT AND CORPORATE
PERFORMANCE COMMITTEE
UNLESS SPECIFICALLY STATED OTHERWISE IN ANY OF THE COMPANY'S FILINGS UNDER
THE SECURITIES ACT OF 1933 OR THE SECURITIES EXCHANGE ACT OF 1934, THE FOLLOWING
REPORT OF THE AUDIT COMMITTEE SHALL NOT BE INCORPORATED BY REFERENCE INTO ANY
SUCH FILINGS AND SHALL NOT OTHERWISE BE DEEMED FILED UNDER SUCH ACTS.
The Audit and Corporate Performance Committee has reviewed and discussed the
audited financial statements of the Company for the fiscal year ended
December 31, 2001 with the Company's management and with Deloitte & Touche LLP,
the Company's independent auditors. The Committee discussed with Deloitte &
Touche LLP the matters required to be discussed by Statement on Auditing
Standards No. 61 (Communication with Audit Committees).
The Committee has received the written disclosures and the letter from
Deloitte & Touche LLP required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees), and has discussed the
independence of Deloitte & Touche LLP with that firm.
Based upon the review and discussions noted above, the Audit and Corporate
Performance Committee recommended to the Board of Directors that the Company's
audited financial statements be included in the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 2001 for filing with the
Securities and Exchange Commission.
The Board of Directors has determined that the members of the Audit and
Corporate Performance Committee are "independent" for purposes of the New York
Stock Exchange listing standards.
The Audit Committee has adopted a written policy statement (charter), which
was included as Exhibit A to the proxy statement dated April 6, 2001 for the
Company's 2001 Annual Meeting of Shareholders.
Audit and Corporate Performance
Committee:
Richard L. Daugherty, Chairman
David L. Burner
W. D. Frederick, Jr.
John H. Mullin, III
Carlos A. Saladrigas
Jean Giles Wittner
31
<Page>
DISCLOSURE OF AUDITORS' FEES
Set forth below is certain information relating to the aggregate fees billed
by Deloitte & Touche LLP, the member firms of Deloitte Touche Tohmatsu, and
their respective affiliates (collectively, "Deloitte") for professional services
rendered for the fiscal year ended December 31, 2001.
AUDIT FEES
The aggregate fees billed by Deloitte for professional services rendered for
the audit of the Company's annual financial statements for the fiscal year ended
December 31, 2001 and for the reviews of the financial statements included in
the Company's Quarterly Reports on Form 10-Q for that fiscal year were $360,000.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
During the fiscal year ending December 31, 2001, there were no professional
services rendered by Deloitte relating to financial information systems design
and implementation to the Company.
ALL OTHER FEES
The aggregate fees billed by Deloitte for services rendered to the Company,
other than the services described above under "Audit Fees" and "Financial
Information Systems Design and Implementation Fees" for the fiscal year ended
December 31, 2001, were $255,980.
The Audit and Corporate Performance Committee has considered whether the
provision of non-audit services is compatible with maintaining the principal
accountant's independence.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The firm of Deloitte & Touche LLP has been selected by the Board of
Directors to serve as independent public accountants for the Company for the
current year, having served in that capacity since 1930. A representative of
Deloitte & Touche LLP will be present at the Annual Meeting of Shareholders,
will have the opportunity to make a statement and will be available to respond
to appropriate questions.
FINANCIAL STATEMENTS
Progress Energy's 2001 Annual Report, which includes financial statements
for the fiscal years ended December 31, 2001, and 2000, together with related
notes, audited statements of income and changes in financial position for the
three most recent years, and the report of Deloitte & Touche LLP, independent
public accountants, was mailed to shareholders of record as of the close of
business on March 1, 2002.
32
<Page>
FUTURE SHAREHOLDER PROPOSALS
Shareholder proposals submitted for inclusion in the proxy statement for the
Company's 2003 Annual Meeting must be received no later than December 2, 2002 at
the Company's principal executive offices, addressed to the attention of:
William D. Johnson
Executive Vice President,
General Counsel and Secretary
Carolina Power & Light Company
Post Office Box 1551
Raleigh, North Carolina 27602-1551
Any other proposal which a shareholder desires to be presented for action at
an Annual Meeting must be received by the Secretary of the Company no later than
the close of business on the 60th day prior to the first anniversary of the
immediately preceding year's annual meeting. The proposal must include a brief
description of the business desired to be brought before the meeting, the
shareholder's name and address, the class and number of shares owned by the
shareholder and disclosure of any material interest the shareholder may have in
the matter proposed.
OTHER BUSINESS
The Board of Directors does not intend to bring any business before the
meeting other than that stated in this Proxy Statement. The Board knows of no
other matter to come before the meeting. If other matters are properly brought
before the meeting, it is the intention of the Board of Directors that the
persons named in the enclosed Proxy will vote on such matters pursuant to the
Proxy in accordance with their best judgment.
33
<Page>
DIRECTIONS TO
CAROLINA POWER & LIGHT COMPANY'S
2002 ANNUAL SHAREHOLDERS' MEETING
(to be held at the Mahaffey Theater at the Bayfront Center in St. Petersburg,
Florida)
[MAP]
CAR-PS-02
<Page>
(logo) CP&L
A Progress Energy Company
VOTING INSTRUCTIONS
VOTE BY PHONE: It's fast, convenient and immediate!
Call Toll-Free on a Touch-Tone Phone.
Follow these four easy steps:
1. Read the accompanying Proxy Statement and this Proxy
Card.
2. Call the toll-free number (1-877-779-8683). There is
no charge for this call.
3. Enter your Control Number located on this Proxy Card.
4. Follow the recorded instructions.
VOTE BY CARD Complete, sign, date and return your proxy card in the
enclosed envelope
Your vote is important! Call 1-877-779-8683 anytime!
DO NOT RETURN THIS PROXY CARD IF YOU ARE VOTING BY TELEPHONE UNLESS YOU
INTEND TO REVOKE YOUR PRIOR VOTE.
DETACH CARD DETACH CARD
|X| PLEASE MARK VOTE
AS IN THIS EXAMPLE
<Table>
<Caption>
CAROLINA POWER & LIGHT COMPANY DIRECTORS RECOMMEND VOTE FOR
----------------------------
MARK BOX AT RIGHT IF AN ADDRESS 1. ELECTION OF DIRECTORS AS SET FORTH
CHANGE HAS BEEN NOTED ON THE IN THE PROXY STATEMENT For All With- For All
REVERSE SIDE OF THIS CARD. Nominees hold Except
NOMINEES: |_| |_| |_|
(01) W. FREDERICK (04) C. SALADRIGAS
(02) W. MCCOY (05) J. WILSON
CONTROL NUMBER: (03) J. MULLIN
</Table>
<Table>
NOTE: IF YOU DO NOT WISH YOUR SHARES VOTED "FOR" A PARTICULAR NOMINEE, MARK THE "FOR ALL
EXCEPT" BOX AND STRIKE A LINE THROUGH THE NAME(S) OF THE NOMINEE(S). YOUR SHARES WILL BE VOTED
"FOR" THE REMAINING NOMINEE(S).
2. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS THAT IS
PROPERLY BROUGHT BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.
</Table>
<Table>
Please be sure to sign and date this Proxy Date
Shareholder sign here Co-owner sign here
</Table>
<Page>
CAROLINA POWER & LIGHT COMPANY
Dear Shareholder,
Please take note of the important information enclosed with the Proxy Card. That
information relates to the management and operation of your Company and requires
your immediate attention and approval. Details are discussed in the enclosed
proxy materials.
Your vote counts, and you are strongly encouraged to exercise your right to vote
your shares.
Please mark the box on this Proxy Card to indicate how your shares will be voted
then sign the card, detach it and return your proxy card in the enclosed postage
paid envelope.
Your vote must be received prior to the Annual Meeting of Shareholders, May 8,
2002.
Thank you in advance for your prompt consideration of these matters.
Sincerely,
Carolina Power & Light Company
CAROLINA POWER & LIGHT COMPANY
410 S. WILMINGTON STREET, RALEIGH, NORTH CAROLINA 27601-1849
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY
PROXY. The undersigned hereby appoints William Cavanaugh III and Robert B.
McGehee, and each of them as Proxies, with full power of substitution, to vote
the shares of stock of Carolina Power & Light Company registered in the name of
the undersigned, or which the undersigned has the power to vote, at the Annual
Meeting of Shareholders of the Company to be held Wednesday, May 8, 2002, at
10:00 a.m., and at any adjournment thereof, for the election of directors, and
upon other matters properly brought before the meeting. The undersigned
acknowledges receipt of the notice of said Annual Meeting and the proxy
statement.
THIS PROXY WILL BE VOTED AS DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER(S).
UNLESS OTHERWISE SPECIFIED, IT WILL BE VOTED FOR THE ELECTION OF DIRECTORS AS
SET FORTH IN THE PROXY STATEMENT. THE NOMINEES FOR DIRECTOR ARE: W. FREDERICK,
W. MCCOY, J. MULLIN, C. SALADRIGAS AND J. WILSON. IF ANY DIRECTOR BECOMES
UNAVAILABLE, THE PROXIES WILL VOTE FOR A SUBSTITUTE DESIGNATED BY THE BOARD.
PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.
NOTE: Please sign exactly as name(s) appear(s) hereon. When signing as attorney,
executor, administrator, trustee or guardian, or as custodian for a minor,
please give full title as such. If a corporation, please have signed in full
corporate name by any authorized officer, giving full title. If a partnership,
sign in full partnership name by an authorized person, giving full title.
HAS YOUR ADDRESS CHANGED? IF SO, COMPLETE BELOW.
NEW ADDRESS: